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Paris - Moody's Investors Service on Friday downgraded the deposit and senior debt ratings of eight Greek banks following its downgrade earlier in the week of Greece's sovereign ratings.
Moody's cited the main reason of the downgrade as "the rising likelihood of a sovereign debt restructuring, which is reflected in the rating action on the Greek sovereign."
On Wednesday Moody's downgraded Greece's sovereign rating to Caa1 from B1, which puts the odds of a debt default at even.
Athens has been struggling to get EU and IMF to sign off on the next instalment of its €110bn bailout amid increasing expectations it will need a second bailout to keep up on top of its debt.
Moody's said there would likely be a high default correlation between Greece and Greek banks.
In the event of a sovereign debt restructuring, Greek banks would take a direct hit by a reduction in the value of their Greek government bond (GGB) portfolios, which would significantly weaken their capitalisation ratios, noted Moody's.
The ratings agency also said Greek banks would be exposed to a potential erosion of their funding sources owing to a potential acceleration in deposit withdrawals and uncertainties regarding continued access to European Central Bank (ECB) liquidity.
Moody's downgraded National Bank of Greece SA (NBG), EFG Eurobank Ergasias SA (Eurobank) Alpha Bank AE (Alpha) Piraeus Bank SA (Piraeus), Agricultural Bank of Greece (ATE) and Attica Bank SA to B3.
Emporiki Bank of Greece (Emporiki) and General Bank of Greece (Geniki) were downgraded to B1.
Moody's said the banks remain on negative watch for further downgrade along with Greece's sovereign rating.
